Readers undoubtedly are aware that late last week the judge presiding over the New York civil fraud trial against Donald Trump, the Trump Organization and related entities, and various Organization’s executives (including two of Trump’s sons) entered a post-trial verdict against the defendants that, together with pre-judgment interest, exceeds $450 million in value. In making the award, the judge concluded that Trump and the other defendants had fraudulently misrepresented the Organization’s and Trump’s financial condition to banks, insurance companies, and public officials. Of interest to readers of this blog, among the allegedly fraudulent acts was the procurement of D&O insurance, as well as surety insurance, through alleged misrepresentations. As discussed below, there are several interesting things about the insurance part of the court’s verdict. A copy of the February 16, 2024, Decision and Order of New York (New York County) Supreme Court Justice Arthur F. Engoron can be found here.Continue Reading The Insurance Part of the Massive Trump Civil Fraud Verdict
A federal district court has held that because of an insured company’s application misrepresentation about possible M&A activity, a D&O insurance policy’s Warranty Exclusion precludes coverage for the policyholder’s costs incurred in defending claims arising out of the insured company’s acquisition. The court’s opinion raises interesting questions about how the meaning of application questions is to be determined. Central District of California Judge Phillip Gutierrez’s February 4, 2019 opinion in the case can be found here. An April 15, 2019 post on the Wiley Rein law firm’s Executive Summary Blog can be found here.
Continue Reading D&O Insurance: Warranty Exclusion Precludes Coverage Due to Application Misrepresentation
Material misrepresentations in an insurance application can serve as the basis for rescission of the resulting policy. A recent federal district court decision examined the question of whether or not an insurer could rescind a fidelity bond on the grounds that the credit union manager who signed the credit union’s insurance application failed to disclose that she was embezzling funds from the credit union. In a March 17, 2017 opinion (here), District of Minnesota Judge Donovan Frank, applying Minnesota law, held that because the manager was acting entirely for her own benefit when she failed to disclose her theft, the misrepresentation could not be imputed to the credit union, and therefore the insurer was not entitled to rescind the bond.
Continue Reading Fidelity Bond Rescission Denied Where Application Signatory Was Embezzling Credit Union’s Funds